The second-hand economy is rapidly transforming the retail landscape as major brands and start-ups dive into this booming market. Companies like Shein, Zara, H&M, and Lego are seizing the opportunity driven by both environmental concerns and shifting consumer preferences. The global second-hand clothing market, which was valued at $141 billion in 2021, is projected to hit $350 billion by 2028, outpacing the growth of new apparel sales by three times. This trend is especially strong among younger shoppers, with over 40% of Generation Z and millennials regularly buying second-hand items.
Ikea is the latest big name to join the trend, launching Ikea Preowned, a peer-to-peer marketplace for used furniture, initially in Madrid and Oslo. This platform allows users to buy and sell directly, offering sellers incentives like cash or additional store vouchers. The move aims to compete with existing platforms like eBay and Craigslist, but it also highlights the challenges in this sector. For instance, managing the quality and authenticity of second-hand goods, handling fraud, and overcoming the complexities of reverse logistics can be tricky.
Lego is also innovating in this space with its "Replay" service, which encourages customers to donate used bricks. This initiative reflects Lego's shift from traditional linear manufacturing to a more sustainable, circular approach. Despite the excitement around second-hand shopping, the industry faces hurdles. According to Bain & Company, second-hand luxury sales have surged by 125% from 2017 to 2023, compared to just 43% growth for new luxury items.
However, established non-profits like Goodwill, which benefit from free inventory and specialized sorting expertise, still hold a significant advantage.
The second-hand market’s expansion reflects a broader shift in consumer values towards sustainability and cost-effectiveness, presenting both opportunities and challenges for brands navigating this evolving sector. This is especially reflected in the younger generations with a shift towards upholding companies on ESG and making sustainable choices. Second-hand clothing is set to make up 10% of the global fashion market by next year, driven by rising living costs and sustainability concerns. Sales jumped 18% last year to $197 billion and are projected to reach $350 billion by 2028. The U.S. second-hand market grew seven times faster than overall fashion retail, which saw flat sales in 2023.
Despite the booming interest in second-hand fashion, profitability is a major hurdle. Although the market for pre-owned clothes is growing fast—projected to double to $3.5 billion by 2027—many retailers are struggling to make money. Despite big investments and rapid expansion, even top players in the second-hand space face financial challenges. High operational costs and an imbalance between supply and demand make it tough for businesses to turn a profit, showing that even with a strong market, financial success is elusive.